The EPA is moving forward with the second stage of the Climate Action Plan – regulation of methane emissions from the oil and gas industry. Even while the first stage in President Obama’s Climate Action Plan, the Clean Power Plan, is on hold pending the outcome of legal challenges, EPA issued the pre-publication versions of two final rules specifically targeting newly constructed and modified sources of air pollution in the oil and gas industry. In addition, EPA issued a draft Information Collection Request that would require owners and operators to provide methane data from existing oil and gas operations, which is the first step towards regulating methane emissions from existing oil and gas operations. Note that EPA invokes as their authority for moving toward the regulation of methane at existing oil and gas operations the same section of the Clean Air Act (111(d)) which is the subject of the Clean Power Plan litigation. Of particular importance within the Clean Power Plan litigation is EPA’s assertion of authority over the entire electricity grid as a “system of emission reduction” which could be a prologue to their assertion of authority over the existing oil and gas pipeline system.
Performance Standards
The final rules establish New Source Performance Standards (“NSPS”) requiring the capture, control, and monitoring of methane and VOC emissions from hydraulic fracturing, compressors, pneumatic controllers, pumps, and processing plants. The NSPS will extend “green completion” requirements to oil wells (where previously they applied only to gas wells) and require implementation of Leak Detection and Repair (“LDAR”) monitoring plans. EPA has estimated the compliance costs will be $530 million—25% higher than the proposed rule.
Aggregation
The second rule clarified how EPA will determine what a “source” is for permitting purposes. Specifically, “adjacent” facilities can be aggregated to be treated as a single “source” of air pollution and the emissions from these adjacent facilities can be added together to determine if thresholds that trigger regulation are met. The rule establishes a bright line test under which activities and facilities are considered a single source if they are (a) under common control; (b) have the same SIC number; and (c) are located on contiguous or adjacent properties. Under the new rule, pieces of equipment are considered adjacent if they are located on the same site or on sites that share equipment and are within ¼ mile of each other.
Compliance and Enforcement
The new rules apply to oil and gas facilities which were constructed, modified, or reconstructed on or after September 18, 2015 (the date the new rule was proposed). The final rule will be effective 60 days after it is published in the Federal Register. Operators will have one year from the effective date of the rule or 60 days from the start of production, whichever is later, to implement an LDAR program. Green completion technology will be required at new oil wells within 180 days of the effective date.
Every three years the EPA sets National Enforcement Initiatives (“NEIs”) to address what it believes to be most pressing pollution problems. One of the currently listed NEIs is “Ensuring Energy Extraction Activities Comply with Environmental Laws.” Additionally, certain requirements within the final rules also lend themselves to enforcement action under EPA’s Next Generation Compliance strategies. For example, the increased focus on record keeping, electronic reporting, monitoring data, and digital picture reporting gives EPA additional ammunition to pursue enforcement matters without ever having to step foot on site. EPA has noted that it anticipates a 25% decline in EPA inspections by 2018.1 However, the use of more electronic reporting and increased ability to mine this data for evidence of non-compliance lets EPA continue enforcing these regulations from afar. In Texas, TCEQ will be primarily responsible for enforcing compliance with these regulations, but EPA has authority under the Clean Air Act to pursue its own enforcement actions as well.
Public Participation
Given the substantial burdens on the oil and gas industry created by the rule, it is likely industry groups will challenge it. Any challenge must be brought in the United States Court of Appeals for the District of Columbia Circuit, within 60 days after the rule is published in the federal register. A prepublication version of the NSPS can be found here.
The information collection request is not yet final. Instead, EPA proposes to publish it in the Federal Register and take comments for 60 days. EPA proposed to send operators of existing oil and gas facilities (chosen at random) a two part survey to collect information (1) cataloguing the number and types of equipment at production facilities and (2) collecting detailed, unit-specific information regarding emission-control devices and practices (Part 2). A link to the prepublication version of the data information request can be found here.
1 FY2014-2018 EPA Strategic Plan.
